March 2018 Producer Price Final Demand Year-Over-Year Inflation Again Increased

The Producer Price Index year-over-year inflation marginally grew from 2.7 % to 2.8 %.

Analyst Opinion of Producer Prices

The Producer Price Index marginally grew year-over-year. Here is what the BLS said in part:

The Producer Price Index for final demand advanced 0.3 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.2 percent in February and 0.4 percent in January. (See table A.) On an unadjusted basis, the final demand index increased 3.0 percent for the 12 months ended in March. In March, 70 percent of the rise in the final demand index is attributable to a 0.3-percent advance in prices for final demand services. The index for final demand goods also climbed 0.3 percent.

The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.

The market had been expecting (from Bloomberg):

month over month change Consensus Range Consensus Actual PPI-Final Demand (PPI-FD) 0.0 % to 0.4 % +0.1 % +0.3 % PPI-FD less food & energy (core PPI) 0.2 % to 0.3 % +0.2 % +0.3 % PPI-FD less food, energy & trade services 0.2 % to 0.4 % +0.3 % +0.4 %

The producer price inflation breakdown:

category month-over-month change year-over-year change final demand goods +0.3 %   final demand services +0.3 %   total final demand +0.3 % +3.0 % processed goods for intermediate demand -0.3 % +4.6 % unprocessed goods for intermediate demand -4.8 % +4.2 % services for intermediate demand +0.3 % +3.2 %

 

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In the following graph, one can see the relationship between the year-over-year change in intermediate goods index and finished goods index. When the crude goods growth falls under finish goods – it usually drags finished goods lower.